EMC Insurance Group Inc. Reports 2013 Fourth Quarter and Year-End Results and 2014 Operating Income Guidance

DES MOINES, Iowa--(BUSINESS WIRE)--

EMC Insurance Group Inc. EMCI today reported operating income of $12,489,000 ($0.95 per share) for the fourth quarter ended December 31, 2013, compared to $12,729,000 ($0.99 per share) for the fourth quarter of 2012¹. For the year ended December 31, 2013, the Company reported operating income of $37,671,000 ($2.88 per share), compared to $32,755,000 ($2.54 per share) for the same period in 2012.

Net income, including realized investment gains and losses, totaled $15,834,000 ($1.20 per share) for the fourth quarter of 2013, compared to $12,998,000 ($1.01 per share) for the fourth quarter of 2012. For the year ended December 31, 2013, net income totaled $43,519,000 ($3.33 per share), compared to $37,966,000 ($2.95 per share) for the same period in 2012.

“The fourth quarter was a solid finish to a strong year,” stated President and Chief Executive Officer Bruce G. Kelley. “The reinsurance segment produced exceptionally good results for the fourth quarter and full year, and the property and casualty insurance segment's results are in line with expectations. As a result, operating income per share for the year exceeded the high end of our operating income guidance,” continued Kelley.

Kelley went on to say, “We are pleased to report another quarter of high-single-digit rate level increases in the property and casualty insurance segment that continued to outpace the industry average and are consistent with rate level increases achieved through the first nine months of the year. We expect rate level increases to continue into 2014, although at a somewhat lower level.”

Premiums earned increased 15.5 percent to $135,458,000 for the fourth quarter of 2013, from $117,271,000 for the fourth quarter of 2012. In the property and casualty insurance segment, premiums earned increased 9.5 percent, with the majority of the increase attributable to rate level increases on renewal business and growth in insured exposures on existing accounts. In the reinsurance segment, premiums earned increased 38.7 percent. This increase is unusually large due to the significant decline that occurred in year-end 2012 “earned but not reported” premiums on several pro rata accounts. Excluding the change in “earned but not reported” premiums, the increase in fourth quarter premiums is primarily attributed to growth in the offshore energy and liability proportional account, moderate rate level increases and the addition of some new business. For the year ended December 31, 2013, premiums earned increased 12.3 percent (10.0 percent in the property and casualty insurance segment and 20.7 percent in the reinsurance segment).

The Company's GAAP combined ratio was 94.6 percent in the fourth quarter of 2013, compared to 93.4 percent in the fourth quarter of 2012. For the year ended December 31, 2013, the Company's GAAP combined ratio was 97.9 percent, compared to 99.6 percent in 2012.

Catastrophe and storm losses totaled $6,766,000 ($0.33 per share after tax) in the fourth quarter of 2013, compared to $8,086,000 ($0.41 per share after tax) in the fourth quarter of 2012. Fourth quarter 2013 catastrophe and storm losses accounted for 5.0 percentage points of the combined ratio, which is higher than the Company's most recent 10-year average of 3.0 percentage points for this period, but below the 6.9 percentage points experienced in the fourth quarter of 2012. For the year ended December 31, 2013, catastrophe and storm losses totaled $48,578,000 ($2.41 per share after tax), compared to $53,460,000 ($2.70 per share after tax) in 2012. Catastrophe and storm losses accounted for 9.4 percentage points of the combined ratio, slightly below the most recent 10-year average of 9.9 percentage points and below the 11.7 percentage points experienced in the prior year. On a segment basis, catastrophe and storm losses amounted to $2,662,000 ($0.13 per share after tax) and $37,262,000 ($1.85 per share after tax) in the property and casualty insurance segment, and $4,104,000 ($0.20 per share after tax) and $11,316,000 ($0.56 per share after tax) in the reinsurance segment, for the fourth quarter and year ended December 31, 2013, respectively.

The Company reported $5,157,000 ($0.25 per share after tax) of favorable development on prior years' reserves during the fourth quarter of 2013, compared to $258,000 ($0.01 per share after tax) of adverse development in the fourth quarter of 2012. For the year ended December 31, 2013, the Company reported favorable development totaling $12,785,000 ($0.64 per share after tax), compared to $25,733,000 ($1.30 per share after tax) in 2012. Development on prior years' reserves resulting solely from changes in the allocation of bulk reserves between the current and prior accident years does not have an impact on earnings. This is due to the fact that such development is simply a mathematical by-product of the mechanical process used to reallocate total bulk reserves to the various accident years. Earnings are only impacted by changes in the total amount of carried reserves. The development amounts reported for the fourth quarter and year ended 2013 include $6,526,000 of favorable development that resulted solely from changes in the allocation of bulk reserves between the current and prior accident years, while the reported development amounts for the fourth quarter and year ended 2012 include $4,551,000 of adverse development that resulted solely from such changes in the allocation of bulk reserves.

Excluding the development amounts that resulted solely from changes in the allocation of bulk reserves between accident years, the implied amounts of favorable (adverse) development that had an impact on earnings would be approximately ($1,369,000) and $6,259,000 for the fourth quarter and year ended 2013, compared to $4,293,000 and $30,284,000 for the same periods in 2012. The change in implied development for the fourth quarter of 2013 is primarily attributed to the property and casualty insurance segment, which experienced adverse development of $3,182,000, compared to favorable development of $1,380,000 in 2012. Both the property and casualty insurance segment and the reinsurance segment experienced declines in favorable development for the year ended December 31, 2013.

Development amounts can vary significantly from quarter to quarter and year to year depending on a number of factors, including the number of claims settled and the settlement terms, and should therefore not be considered a reliable factor in assessing the adequacy of the Company's carried reserves. The most recent actuarial analysis of the Company's carried reserves indicates that carried reserves remain within the top quartile of the range of reasonable reserves, but at a slightly lower level within the quartile relative to the 2012 evaluation.

Large losses (which the Company defines as losses greater than $500,000 for the EMC Insurance Companies' pool, excluding catastrophe and storm losses) increased to $6,954,000 ($0.34 per share after tax) in the fourth quarter of 2013 from $4,138,000 ($0.21 per share after tax) in the fourth quarter of 2012. For the year ended December 31, 2013, large losses increased moderately to $22,240,000 ($1.10 per share after tax) from $21,241,000 ($1.07 per share after tax) in 2012.

Net investment income increased 1.1 percent to $10,994,000 for the fourth quarter of 2013 from $10,871,000 in the fourth quarter of 2012. For the year ended December 31, 2013, net investment income decreased 2.5 percent to $43,022,000 from $44,145,000 in 2012. This decline is primarily attributable to the prolonged low interest rate environment, but does reflect an increase in dividend income in the equity portfolio. It should be noted that the decline in investment income reported for 2013 reflects a $160,000 increase in the amount of funds received from settlements of securities litigation. Excluding this amount from the calculation, the decline in investment income would have been 2.9 percent.

Net realized investment gains totaled $3,345,000 ($0.25 per share) in the fourth quarter of 2013, compared to $269,000 ($0.02 per share) in the fourth quarter of 2012. For the year ended December 31, 2013, net realized investment gains totaled $5,848,000 ($0.45 per share), compared to $5,211,000 ($0.40 per share) in 2012.

At December 31, 2013, consolidated assets totaled $1.4 billion, including $1.3 billion in the investment portfolio, and stockholders' equity totaled $455.2 million, an increase of 13.5 percent from December 31, 2012. Book value of the Company's stock increased 10.1 percent to $34.21 per share, from $31.08 per share at December 31, 2012. Approximately 4.2 percentage points ($1.32 per share) of the increase is attributable to the change previously announced by Employers Mutual Casualty Company that effective January 1, 2015, it will be replacing its retiree healthcare plan with a new Employers Mutual-funded Health Reimbursement Arrangement. This resulted in a reduction of the plan's projected benefit obligation and an increase in stockholders' equity. Book value excluding accumulated other comprehensive income increased to $29.78 per share from $27.38 per share at December 31, 2012.

Management is projecting that 2014 operating income will be within a range of $3.00 to $3.25 per share. This guidance is based on a projected GAAP combined ratio of 96.8 percent for the year and investment income consistent with the amount reported in 2013. The projected GAAP combined ratio has a load of 10.0 points for catastrophe and storm losses.

The Company will hold an earnings teleconference call at noon Eastern Time on February 20, 2014 to allow securities analysts, stockholders and other interested parties the opportunity to hear management discuss the Company's results for the fourth quarter and the year ended December 31, 2013, as well as its expectations for 2014. Dial-in information for the call is toll-free 1-877-407-9205 (International: 1-201-689-8054). The event will be archived and available for digital replay through May 20, 2014. The replay access information is toll-free 1-877-660-6853 (International: 1-201-612-7415); conference ID number 13574435.

Members of the news media, investors and the general public are invited to access a live webcast of the conference call via the Company's investor relations page at www.emcins.com/ir. The webcast will be archived and available for replay until May 20, 2014. A transcript of the teleconference will also be available on the Company's website shortly after the completion of the teleconference.

About EMCI:
EMC Insurance Group Inc. is a publicly held insurance holding company with operations in property and casualty insurance and reinsurance, which was formed in 1974 and became publicly held in 1982. The Company's common stock trades on the Global Select Market tier of the NASDAQ OMX Stock Market under the symbol EMCI. Additional information regarding EMC Insurance Group Inc. may be found at www.emcins.com/ir. EMCI's parent company is Employers Mutual Casualty Company (EMCC). EMCI and EMCC, together with their subsidiary and affiliated companies, conduct operations under the trade name EMC Insurance Companies.

Forward-Looking Statements:
The Private Securities Litigation Reform Act of 1995 provides issuers the opportunity to make cautionary statements regarding forward-looking statements. Accordingly, any forward-looking statement contained in this report is based on management's current beliefs, assumptions and expectations of the Company's future performance, taking into account all information currently available to management. These beliefs, assumptions and expectations can change as the result of many possible events or factors, not all of which are known to management. If a change occurs, the Company's business, financial condition, liquidity, results of operations, plans and objectives may vary materially from those expressed in the forward-looking statements.

The risks and uncertainties that may affect the actual results of the Company include, but are not limited to, the following:

• catastrophic events and the occurrence of significant severe weather conditions;
• the adequacy of loss and settlement expense reserves;
• state and federal legislation and regulations;
• changes in the property and casualty insurance industry, interest rates or the performance of financial markets and the general economy;
• rating agency actions;
• “other-than-temporary” investment impairment losses; and
• other risks and uncertainties inherent to the Company's business, including those discussed under the heading “Risk Factors” in the Company's Annual Report on Form 10-K.

Management intends to identify forward-looking statements when using the words “believe,” “expect,” “anticipate,” “estimate,” “project,” or similar expressions. Undue reliance should not be placed on these forward-looking statements.

¹The Company prepares its public financial statements in conformity with accounting principles generally accepted in the Unites States of America (GAAP). Operating income is a non-GAAP financial measure, calculated by excluding net realized investment gains from net income. The Company's calculation of operating income may differ from similar measures used by other companies, so investors should exercise caution when comparing the Company's measure of operating income to the measure of other companies. Management's projected operating income guidance is also considered a non-GAAP financial measure.

Management believes operating income is useful to investors because it illustrates the performance of our normal, ongoing operations, which is important in understanding and evaluating our financial condition and results of operations. While this measure is consistent with measures utilized by investors to evaluate performance, it is not a substitute for the GAAP financial measure of net income. Therefore, the Company has provided the following reconciliation of the non-GAAP financial measure of operating income to the GAAP financial measure of net income. Management also uses non-GAAP financial measures for goal setting, determining employee and senior management awards and compensation, and evaluating performance.

The reconciliation of operating income to net income is as follows:

			Three Months Ended December 31,								Year Ended December 31,
			2013				2012				2013				2012
Operating income			$	12,489,000			$	12,729,000			$	37,671,000			$	32,755,000
Net realized investment gains				3,345,000				269,000				5,848,000				5,211,000
Net income			$	15,834,000			$	12,998,000			$	43,519,000			$	37,966,000

CONSOLIDATED STATEMENTS OF INCOME
		Property and
		Casualty								Parent
Quarter ended December 31, 2013		Insurance				Reinsurance				Company				Consolidated
Revenues:
Premiums earned		$	102,111,909			$	33,346,064			$	-			$	135,457,973
Investment income, net			7,973,872				3,022,656				(2,205	)			10,994,323
Other income			172,689				61,018				-				233,707
			110,258,470				36,429,738				(2,205	)			146,686,003
Losses and expenses:
Losses and settlement expenses			65,230,522				18,279,901				-				83,510,423
Dividends to policyholders			2,116,960				-				-				2,116,960
Amortization of deferred policy acquisition costs			17,904,258				7,320,656				-				25,224,914
Other underwriting expenses			15,542,610				1,803,483				-				17,346,093
Interest expense			84,375				-				-				84,375
Other expenses			197,688				148,692				373,133				719,513
			101,076,413				27,552,732				373,133				129,002,278
Operating income (loss) before income taxes			9,182,057				8,877,006				(375,338	)			17,683,725
Realized investment gains			4,456,438				689,772				-				5,146,210
Income (loss) before income taxes			13,638,495				9,566,778				(375,338	)			22,829,935
Income tax expense (benefit):
Current			2,509,717				2,575,110				(131,369	)			4,953,458
Deferred			1,538,525				503,675				-				2,042,200
			4,048,242				3,078,785				(131,369	)			6,995,658
Net income (loss)		$	9,590,253			$	6,487,993			$	(243,969	)		$	15,834,277
Average shares outstanding															13,213,396
Per Share Data:
Net income (loss) per share - basic and diluted		$	0.73			$	0.49			$	(0.02	)		$	1.20
Catastrophe and storm losses (after tax)		$	(0.13	)		$	(0.20	)		$	-			$	(0.33	)
Reported favorable development experienced on prior years (after tax)		$	0.16			$	0.09			$	-			$	0.25
Implied (adverse) favorable development that had an impact on earnings (after tax)		$	(0.16	)		$	0.09			$	-			$	(0.07	)
Dividends per share														$	0.23
Other Information of Interest:
Net written premiums		$	82,824,025			$	35,962,998			$	-			$	118,787,023
Catastrophe and storm losses		$	2,661,969			$	4,104,311			$	-			$	6,766,280
Reported favorable development experienced on prior years' reserves		$	(3,344,417	)		$	(1,812,934	)		$	-			$	(5,157,351	)
Favorable development that had no impact on earnings			6,526,000				-				-				6,526,000
Implied adverse (favorable) development that had an impact on earnings		$	3,181,583			$	(1,812,934	)		$	-			$	1,368,649
GAAP Combined Ratio:
Loss and settlement expense ratio			63.9	%			54.8	%			-				61.7	%
Acquisition expense ratio			34.8	%			27.4	%			-				32.9	%
			98.7	%			82.2	%			-				94.6	%

CONSOLIDATED STATEMENTS OF INCOME
		Property and
		Casualty								Parent
Quarter ended December 31, 2012		Insurance				Reinsurance				Company				Consolidated
Revenues:
Premiums earned		$	93,222,288			$	24,048,708			$	-			$	117,270,996
Investment income, net			7,900,211				2,974,188				(3,715	)			10,870,684
Other income			87,976				84,875				-				172,851
			101,210,475				27,107,771				(3,715	)			128,314,531
Losses and expenses:
Losses and settlement expenses			55,093,127				15,329,707				-				70,422,834
Dividends to policyholders			1,736,076				-				-				1,736,076
Amortization of deferred policy acquisition costs			17,013,604				4,804,578				-				21,818,182
Other underwriting expenses			15,250,782				318,277				-				15,569,059
Interest expense			225,000				-				-				225,000
Other expenses			189,005				(72,000	)			343,003				460,008
			89,507,594				20,380,562				343,003				110,231,159
Operating income (loss) before income taxes			11,702,881				6,727,209				(346,718	)			18,083,372
Realized investment gains			278,297				135,106				-				413,403
Income (loss) before income taxes			11,981,178				6,862,315				(346,718	)			18,496,775
Income tax expense (benefit):
Current			1,700,558				1,465,173				(121,352	)			3,044,379
Deferred			1,834,958				619,517				-				2,454,475
			3,535,516				2,084,690				(121,352	)			5,498,854
Net income (loss)		$	8,445,662			$	4,777,625			$	(225,366	)		$	12,997,921
Average shares outstanding															12,893,673
Per Share Data:
Net income (loss) per share - basic and diluted		$	0.66			$	0.37			$	(0.02	)		$	1.01
Catastrophe and storm losses (after tax)		$	(0.15	)		$	(0.26	)		$	-			$	(0.41	)
Reported (adverse) favorable development experienced on prior years (after tax)		$	(0.16	)		$	0.15			$	-			$	(0.01	)
Implied favorable development that had an impact on earnings (after tax)		$	0.07			$	0.15			$	-			$	0.22
Dividends per share														$	0.21
Other Information of Interest:
Net written premiums		$	76,969,211			$	25,239,548			$	-			$	102,208,759
Catastrophe and storm losses		$	2,877,749			$	5,207,920			$	-			$	8,085,669
Reported adverse (favorable) development experienced on prior years' reserves		$	3,170,644			$	(2,912,511	)		$	-			$	258,133
Adverse development that had no impact on earnings			(4,551,000	)			-				-				(4,551,000	)
Implied favorable development that had an impact on earnings		$	(1,380,356	)		$	(2,912,511	)		$	-			$	(4,292,867	)
GAAP Combined Ratio:
Loss and settlement expense ratio			59.1	%			63.7	%			-				60.1	%
Acquisition expense ratio			36.5	%			21.3	%			-				33.3	%
			95.6	%			85.0	%			-				93.4	%

CONSOLIDATED STATEMENTS OF INCOME
		Property and
		Casualty								Parent
Year Ended December 31, 2013		Insurance				Reinsurance				Company				Consolidated
Revenues:
Premiums earned		$	392,718,848			$	122,787,418			$	-			$	515,506,266
Investment income, net			31,396,676				11,634,972				(9,473	)			43,022,175
Other income			765,343				61,018				-				826,361
			424,880,867				134,483,408				(9,473	)			559,354,802
Losses and expenses:
Losses and settlement expenses			260,917,009				72,370,440				-				333,287,449
Dividends to policyholders			10,863,688				-				-				10,863,688
Amortization of deferred policy acquisition costs			68,851,027				25,876,641				-				94,727,668
Other underwriting expenses			62,522,516				3,231,925				-				65,754,441
Interest expense			384,375				-				-				384,375
Other expenses			750,853				366,338				1,364,115				2,481,306
			404,289,468				101,845,344				1,364,115				507,498,927
Operating income (loss) before income taxes			20,591,399				32,638,064				(1,373,588	)			51,855,875
Realized investment gains			7,525,063				1,471,482				-				8,996,545
Income (loss) before income taxes			28,116,462				34,109,546				(1,373,588	)			60,852,420
Income tax expense (benefit):
Current			6,803,614				10,603,980				(480,756	)			16,926,838
Deferred			178,304				228,605				-				406,909
			6,981,918				10,832,585				(480,756	)			17,333,747
Net income (loss)		$	21,134,544			$	23,276,961			$	(892,832	)		$	43,518,673
Average shares outstanding															13,086,612
Per Share Data:
Net income (loss) per share - basic and diluted		$	1.61			$	1.78			$	(0.06	)		$	3.33
Catastrophe and storm losses (after tax)		$	(1.85	)		$	(0.56	)		$	-			$	(2.41	)
Reported favorable development experienced on prior years (after tax)		$	0.36			$	0.28			$	-			$	0.64
Implied favorable development that had an impact on earnings (after tax)		$	0.03			$	0.28			$	-			$	0.31
Dividends per share														$	0.86
Book value per share														$	34.21
Effective tax rate															28.5	%
Net income as a percent of beg. SH equity															10.9	%
Other Information of Interest:
Net written premiums		$	405,048,854			$	129,027,846			$	-			$	534,076,700
Catastrophe and storm losses		$	37,262,480			$	11,315,604			$	-			$	48,578,084
Reported favorable development experienced on prior years' reserves		$	(7,281,009	)		$	(5,504,476	)		$	-			$	(12,785,485	)
Favorable development that had no impact on earnings			6,526,000				-				-				6,526,000
Implied favorable development that had an impact on earnings		$	(755,009	)		$	(5,504,476	)		$	-			$	(6,259,485	)
GAAP Combined Ratio:
Loss and settlement expense ratio			66.4	%			58.9	%			-				64.7	%
Acquisition expense ratio			36.3	%			23.7	%			-				33.2	%
			102.7	%			82.6	%			-				97.9	%

CONSOLIDATED STATEMENTS OF INCOME
		Property and
		Casualty								Parent
Year Ended December 31, 2012		Insurance				Reinsurance				Company				Consolidated
Revenues:
Premiums earned		$	357,138,686			$	101,707,313			$	-			$	458,845,999
Investment income, net			32,214,705				11,940,123				(9,754	)			44,145,074
Other income			774,210				85,216				-				859,426
			390,127,601				113,732,652				(9,754	)			503,850,499
Losses and expenses:
Losses and settlement expenses			233,892,280				69,495,435				-				303,387,715
Dividends to policyholders			8,630,580				-				-				8,630,580
Amortization of deferred policy acquisition costs			63,640,886				20,633,887				-				84,274,773
Other underwriting expenses			59,182,195				1,736,396				-				60,918,591
Interest expense			900,000				-				-				900,000
Other expenses			798,046				24,829				1,299,379				2,122,254
			367,043,987				91,890,547				1,299,379				460,233,913
Operating income (loss) before income taxes			23,083,614				21,842,105				(1,309,133	)			43,616,586
Realized investment gains			7,347,944				669,084				-				8,017,028
Income (loss) before income taxes			30,431,558				22,511,189				(1,309,133	)			51,633,614
Income tax expense (benefit):
Current			7,060,964				4,995,795				(462,178	)			11,594,581
Deferred			573,326				1,499,278				-				2,072,604
			7,634,290				6,495,073				(462,178	)			13,667,185
Net Income (loss)		$	22,797,268			$	16,016,116			$	(846,955	)		$	37,966,429
Average shares outstanding															12,886,667
Per Share Data:
Net income (loss) per share - basic and diluted		$	1.77			$	1.24			$	(0.06	)		$	2.95
Catastrophe and storm losses (after tax)		$	(1.74	)		$	(0.96	)		$	-			$	(2.70	)
Reported favorable development experienced on prior years (after tax)		$	0.66			$	0.64			$	-			$	1.30
Implied favorable development that had an impact on earnings (after tax)		$	0.89			$	0.64			$	-			$	1.53
Dividends per share														$	0.81
Book value per share														$	31.08
Effective tax rate															26.5	%
Net income as a percent of beg. SH equity															10.8	%
Other Information of Interest:
Net written premiums		$	371,235,457			$	107,246,028			$	-			$	478,481,485
Catastrophe and storm losses		$	34,372,205			$	19,087,407			$	-			$	53,459,612
Reported favorable development experienced on prior years' reserves		$	(13,056,836	)		$	(12,675,669	)		$	-			$	(25,732,505	)
Adverse development that had no impact on earnings			(4,551,000	)			-				-				(4,551,000	)
Implied favorable development that had an impact on earnings		$	(17,607,836	)		$	(12,675,669	)		$	-			$	(30,283,505	)
GAAP Combined Ratio:
Loss and settlement expense ratio			65.5	%			68.3	%			-				66.1	%
Acquisition expense ratio			36.8	%			22.0	%			-				33.5	%
			102.3	%			90.3	%			-				99.6	%

CONSOLIDATED BALANCE SHEETS
			December 31,				December 31,
			2013				2012
ASSETS
Investments:
Fixed maturity securities available-for-sale, at fair value (amortized cost $1,009,572,325 and $920,843,939)			$	1,027,984,013			$	999,794,857
Equity securities available-for-sale, at fair value (cost $113,835,488 and $111,851,963)				169,848,274				140,293,825
Other long-term investments				2,391,987				863,257
Short-term investments				56,165,534				53,418,914
Total investments				1,256,389,808				1,194,370,853
Cash				238,821				330,392
Reinsurance receivables due from affiliate				34,759,721				34,277,728
Prepaid reinsurance premiums due from affiliate				9,717,368				5,195,892
Deferred policy acquisition costs (affiliated $37,413,643 and $34,425,593)				37,792,442				34,425,593
Prepaid pension and postretirement benefits due from affiliate				23,120,558				1,413,104
Accrued investment income				9,984,651				9,938,714
Accounts receivable				1,079,693				2,390,955
Income taxes recoverable				-				1,588,089
Goodwill				941,586				941,586
Other assets (affiliated $4,780,053 and $5,760,369)				4,908,273				5,836,200
Total assets			$	1,378,932,921			$	1,290,709,106
LIABILITIES
Losses and settlement expenses (affiliated $600,313,349 and $577,476,988)			$	610,180,850			$	583,096,965
Unearned premiums (affiliated $218,787,684 and $196,215,465)				220,627,284				196,215,465
Other policyholders' funds (all affiliated)				8,491,035				6,055,111
Surplus notes payable to affiliate				25,000,000				25,000,000
Amounts due affiliate to settle inter-company transaction balances				13,521,861				19,127,010
Pension and postretirement benefits payable to affiliate				3,401,045				30,714,633
Income taxes payable				1,530,131				-
Deferred income taxes				12,821,660				6,352,690
Other liabilities (affiliated $25,160,554 and $22,794,304)				28,148,819				22,938,068
Total liabilities				923,722,685				889,499,942
STOCKHOLDERS' EQUITY
Common stock, $1 par value, authorized 20,000,000 shares; issued and outstanding, 13,306,027 shares in 2013 and 12,909,457 shares in 2012				13,306,027				12,909,457
Additional paid-in capital				99,308,749				89,205,881
Accumulated other comprehensive income				59,010,489				47,752,375
Retained earnings				283,584,971				251,341,451
Total stockholders' equity				455,210,236				401,209,164
Total liabilities and stockholders' equity			$	1,378,932,921			$	1,290,709,106

INVESTMENTS
The Company had total cash and invested assets with a carrying value of $1.3 billion as of December 31, 2013 and $1.2 billion as of December 31, 2012. The following table summarizes the Company's cash and invested assets as of the dates indicated:
			December 31, 2013
											Percent of
			Amortized				Fair				Total			Carrying
($ in thousands)			Cost				Value				Fair Value			Value
Fixed maturity securities available-for-sale			$	1,009,572			$	1,027,984			81.8	%		$	1,027,984
Equity securities available-for-sale				113,835				169,848			13.5	%			169,848
Cash				239				239			-				239
Short-term investments				56,166				56,166			4.5	%			56,166
Other long-term investments				2,392				2,392			0.2	%			2,392
			$	1,182,204			$	1,256,629			100.0	%		$	1,256,629
			December 31, 2012
											Percent of
			Amortized				Fair				Total			Carrying
($ in thousands)			Cost				Value				Fair Value			Value
Fixed maturity securities available-for-sale			$	920,844			$	999,795			83.7	%		$	999,795
Equity securities available-for-sale				111,852				140,294			11.7	%			140,294
Cash				330				330			-				330
Short-term investments				53,419				53,419			4.5	%			53,419
Other long-term investments				863				863			0.1	%			863
			$	1,087,308			$	1,194,701			100.0	%		$	1,194,701
NET WRITTEN PREMIUMS
			Three Months Ended								Year Ended
			December 31, 2013								December 31, 2013
							Percent of							Percent of
			Percent of				Increase/(Decrease)				Percent of			Increase/(Decrease)
			Net Written				in Net Written				Net Written			in Net Written
			Premiums				Premiums				Premiums			Premiums
Property and Casualty Insurance
Commercial Lines:
Automobile				16.2	%			10.2	%		17.0	%			12.8	%
Liability				14.1	%			10.2	%		15.1	%			12.1	%
Property				16.2	%			11.0	%		17.3	%			12.9	%
Workers' compensation				12.9	%			11.0	%		15.9	%			9.0	%
Other				1.5	%			7.5	%		1.4	%			1.7	%
Total commercial lines				60.9	%			10.5	%		66.7	%			11.5	%
Personal Lines:
Automobile				4.9	%			(10.0	)%		4.9	%			(6.8	)%
Property				3.8	%			(8.0	)%		4.0	%			(4.9	)%
Liability				0.1	%			14.0	%		0.2	%			12.1	%
Total personal lines				8.8	%			(8.9	)%		9.1	%			(5.7	)%
Total property and casualty insurance				69.7	%			7.6	%		75.8	%			9.1	%
Reinsurance:
Pro rata (1) (2)				14.9	%			161.7	%		10.1	%			51.7	%
Excess of loss (1)				15.4	%			(1.2	)%		14.1	%			4.8	%
Total reinsurance				30.3	%			42.5	%		24.2	%			20.3	%
Total				100.0	%			16.2	%		100.0	%			11.6	%
(1) Includes $532,146 negative portfolio adjustment related to the January 1, 2013 decreased participation in the MRB pool.
(2) Includes $3,065,279 negative portfolio adjustment related to the January 1, 2012 cancellation of a large pro rata account.